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Old 07-05-2007, 08:31 AM   #9

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Re: Trading With Market Statistics.II The Volume Weighted Average Price (VWAP).

Here is my 2cents with the VWAP. I keep a real-time record of the VWAP similar to how a POC moves higher or lower. As the VWAP is lifting I focus on the long side. If I am long and the VWAP starts to drop (even by tenths of a point) I take this as a warning signal. Vice versa for shorts. So picture the VWAP number moving up and down just like the tape. Also keep in mind that the VWAP is a common number viewed by many insitutional traders as well as the general public investors.
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Old 07-05-2007, 01:16 PM   #10

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Re: Trading With Market Statistics.II The Volume Weighted Average Price (VWAP).

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Originally Posted by Nick1984 »
The way I see it is that you need to really wait for most of the day to finish before you get a clear development of your volume histogram so the VWAP and PVP would be used retrospectively i.e: the VWAP and PVP made today would give me an indication of what to expect tomorrow?
Good observation Nick. Todays VWAP and PVP can be used for tomorrow's trade setups. We will cover that topic down the road when we get to more advanced types of trades. However, you will see in the videos that you can use todays developing VWAP to make trades today. This will be the basic VWAP trade that must be understood before we move on. Newbies will be able to get their feet wet here. A sort of crawling before we start walking.
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In essence this seems to be similar to MP but using volume histograms instead of TPO's. Correct me if I'm wrong though. It's a very interesting thing you've got going on here.
Market Profile Analysis is actually a subset of this more general way of looking at market statistics. There are important differences, however. a)Market Profile uses half hour increments for setting up the distribtuion. Generalized market statistics has no special time scale. b)I introduce the concept of the distribution average (the VWAP) which Market Profile does not use. c)There is no concept of value area as used in Market Profile. Value area is a purely heuristic invention. Rather we use the terms, high volume zone or high probability zone and low volume or low probability zone. In addition we will see later on that there is a generalized standard deviation of the VWAP which can be used as a measure of market volatility. But I am getting ahead of myself....so stay tuned.
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Old 07-05-2007, 01:32 PM   #11

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Re: Trading With Market Statistics.II The Volume Weighted Average Price (VWAP).

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Originally Posted by Future »
Here is my 2cents with the VWAP. I keep a real-time record of the VWAP similar to how a POC moves higher or lower. As the VWAP is lifting I focus on the long side. If I am long and the VWAP starts to drop (even by tenths of a point) I take this as a warning signal. Vice versa for shorts. So picture the VWAP number moving up and down just like the tape. Also keep in mind that the VWAP is a common number viewed by many insitutional traders as well as the general public investors.
That's good Future.....glad to see you are using VWAP in your trading. Keep in mind that the dynamics of the VWAP is very different from the PVP (What you call the POC). The VWAP changes gradually over time, whereas the PVP changes abruptly. If you follow both the VWAP and PVP at the same time, you will see this dyanmic. I will show some videos of this so you can get the feel for how the market reacts to changes in the relative relation between the two.
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Old 07-05-2007, 09:52 PM   #12

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Re: Trading With Market Statistics.II The Volume Weighted Average Price (VWAP).

<<The VWAP changes gradually over time, whereas the PVP changes abruptly.>>

the POC does not change abruptly. I only say that because you previously stated that PVP and POC are the same concept.

The purpose of a POC is to show that price has been 'accepted' by buyers and sellers as fair. This only occurs over time. There is no POC until price has been accepted over time -- its just price discovery until then. (if we go a day where price isn't accepted at any price, then it is considered a trend day). we had a thread a month ago or so that discussed how long price had to settle before we considered it an 'accepted price.'

I agree that understanding 'value' versus 'current price' is an important trading concept -- and monitoring how price is acting as it attempts to break away from an established 'balance' is another important concept.
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Old 07-05-2007, 10:05 PM   #13

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Re: Trading With Market Statistics.II The Volume Weighted Average Price (VWAP).

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the POC does not change abruptly. I only say that because you previously stated that PVP and POC are the same concept.
Ok Dogpile, I will accept your distinction. This is why I will use the term PVP rather than POC in describing the peak in the volume distribution function. This peak does change abruptly with time.
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Old 07-06-2007, 03:05 AM   #14

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Re: Trading With Market Statistics.II The Volume Weighted Average Price (VWAP).

The PoC does change abruptly as it is the modal point. So for example if there is a base with a PoC at 432 and price moves up to 478 and builds a new base as more volume is done (or more TPO's pass) at this point the PoC will jump as it becomes higher than the old point.

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Old 07-06-2007, 09:57 AM   #15

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Re: Trading With Market Statistics.II The Volume Weighted Average Price (VWAP).

The POC changes every day. Maybe some would consider that abrupt. Sometimes the market builds what appears to be a POC but later it then builds the real POC at a higher or lower level later. Personally, in the timeframes that I watch the market, I do not consider that abrupt.

This is a core concept -- if you don't understand this -- you do not understand market profile. 'Price' moves in volatile/abrupt fashion, 'value' takes time to build. POC, by definition, does not move as abruptly as price. If you want to call POC movement 'abrupt' --- then what would you call 'price' movement -- 'super-duper abrupt'....?

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Old 07-06-2007, 10:57 AM   #16

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Re: Trading With Market Statistics.II The Volume Weighted Average Price (VWAP).

Quote:
Originally Posted by Dogpile »
The POC changes every day. Maybe some would consider that abrupt. Sometimes the market builds what appears to be a POC but later it then builds the real POC at a higher or lower level later. Personally, in the timeframes that I watch the market, I do not consider that abrupt.

This is a core concept -- if you don't understand this -- you do not understand market profile. 'Price' moves in volatile/abrupt fashion, 'value' takes time to build. POC, by definition, does not move as abruptly as price. If you want to call POC movement 'abrupt' --- then what would you call 'price' movement -- 'super-duper abrupt'....?
Dogpile---I suggest you wait to see the videos that I will be posting in the coming weeks. You will then understand what I mean by the discontinuous change that occurs in the PVP compared to the VWAP.
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